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The Welfare Cost of Inflation and the Regulations of Money Substitutes / Benjamin Eden
World Bank Open Knowledge Repository (formerly "World Bank E-Library Publications") Available online
View online- Format:
- Book
- Government document
- Author/Creator:
- Eden, Benjamin.
- Series:
- Policy research working papers.
- World Bank e-Library.
- Language:
- English
- Subjects (All):
- Access to Finance.
- Debt Markets.
- Economic Theory & Research.
- Emerging Markets.
- Finance and Financial Sector Development.
- Liquidity.
- Macroeconomics and Economic Growth.
- Political Economy.
- Private Sector Development.
- Regulations of Money Substitutes.
- Welfare Cost of Inflation.
- Local Subjects:
- Access to Finance.
- Debt Markets.
- Economic Theory & Research.
- Emerging Markets.
- Finance and Financial Sector Development.
- Liquidity.
- Macroeconomics and Economic Growth.
- Political Economy.
- Private Sector Development.
- Regulations of Money Substitutes.
- Welfare Cost of Inflation.
- Physical Description:
- 1 online resource (65 pages)
- Place of Publication:
- Washington, D.C. : The World Bank, 2016.
- System Details:
- data file
- Summary:
- This paper studies the possibility of using financial regulation that prohibits the use of money substitutes as a tool for mitigating the adverse effects of deviations from the Friedman rule. When inflation is not too high regulation aimed at eliminating money substitutes improves welfare by economizing on transaction costs. The gains from regulation depend on the distribution of income and the level of direct taxation. The area under the demand for money curve is equal to the welfare cost of inflation only when there are no direct taxes and no proportional intermediation cost: otherwise, the area under the demand curve overstates the welfare cost of inflation when money substitutes are not important and understates the welfare cost when money substitutes are important.
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